The game in Europe is as we have described many times before - the Germans want budgetary control throughout all of Europe and the rest of EMU wants Eurobonds. Its a game a chicken with the entire global financial system on the line. The US should not allow itself to become a casualty in this Euro chicken game.

Zervos previously proposed that the Federal Reserve buy massive amounts of EU sovereign bonds, but acknowledged today that it engendered a "bailout culture" that Americans won't be too happy about. Now he says there's actually another way:

So here is another approach that may appeal to the "no bailouters". We could have the Fed cut the USD swap lines with the ECB effective immediately. This would accelerate the game of chicken to the point where a euro financial market crash is basically hours away. Either the ECB monetizes and they begin to issue Eurobonds or the entire Eurosystem falls apart - its that simple. If the US forces the Germans to blink and we get monetization and Eurobonds then its a win! If the Germans don't blink, then US the just nationalizes its own systemic BHCs and watches Europe fall into depression while executing a massive QE3 program to save our own economy. In the later scenario, we print up a whole bunch of USDs to buy up distressed European assets (in fact that worked out pretty well for us back in 90s with the Asian crisis). Either way, we bring this whole painful and annoying saga to a close so we can get on with business of technological advancement and real economic growth.